Sri Lanka: Ruinous tax policies stoke inequality Lead to underfunding education, other key public services: HRW

Sri Lanka’s tax policies played a driving role in the country’s devastating 2022 economic crisis and have contributed to the chronic underfunding of education and other public services, Human Rights Watch has said in a report released on Oct. 15. The government of President Anura Kumara Dissanayake should urgently adopt measures to uphold its human rights obligations and enact reforms to a system that presently favors companies and wealthy people while failing to deliver adequate revenues.

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The 101-page report, “Tax Giveaways, Struggling Schools: How Low Taxes Drove Sri Lanka’s Economic Crisis and Squandered its Education Lead,” describes how Sri Lanka’s successive governments have adopted policies that resulted in inadequate revenues, contributing not only to Sri Lanka defaulting on its debt but also to a decades-long decline in public education spending as a share of Gross Domestic Product (GDP) to among the lowest in the world. It also documents the impacts of inadequate funding on children’s right to education. Moreover, low corporate and personal tax revenues have led to an average of 80 percent of taxes coming from goods and services, which generally are regressive because they claim a higher share of poorer people’s income.

“For decades, Sri Lanka has been hostage to economic policies that starve its government of revenue and reflect a myopic focus on GDP growth,” said Sarah Saadoun, senior economic justice researcher at Human Rights Watch. “In practice, that means education spending has fallen well behind the pace of growth, turning the country from a global leader in public education to a laggard.”

Human Rights Watch interviewed over 70 people, including those affected by the economic situation and familiar with the public education system, as well as a wide spectrum of prominent Sri Lankan economic experts. Human Rights Watch also conducted a comprehensive analysis of relevant data and research relevant to Sri Lanka’s tax policies and education spending.

These policy failures have infringed upon children’s right to education, Human Rights Watch found. Sri Lanka's education spending dropped from between 3 to 5 percent of GDP in the two decades following independence, a time when the country was an education champion among postcolonial countries, to 1.5 percent of GDP in 2022, among the lowest in the world.